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IntelGenx Technologies Corp (OTCMKTS:IGXT) Is Another Play On Tilray Inc (NASDAQ:TLRY)

IntelGenx Technologies Corp (OTCMKTS:IGXT) Is Another Play On Tilray Inc (NASDAQ:TLRY)
Written by
Jim Bloom
Published on
September 24, 2018
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The stock market has been known to reward investors who put their money in investments which will provide value to them. This, both in the short and long-term, is meant to incentivize shareholders to push management to engage in projects which directly benefit the firm’s value; therefore, shareholder value.Over the past one week, the management at IntelGenx Technologies Corp (OTCMKTS:IGXT) has followed the above doctrine to the latter. Through one announcement made public this week which shocked the entire financial market, the company’s short and long-term returns seem to have been secured. As a result, the share price of IGXT soared 115% to close the day at $1.83 on Thursday. However, a pullback happened later in the week, reducing the price to its current level of $1.21 where it found its support. The firm has since been trading between $1.18 and $1.8 throughout the week as shown in the chart below: IGXT Daily ChartCannabis stocks seem to be following the same trend altogether: the green side of the chart. It may thus seem like IGXT is merely railing on the success of the cannabis sector rather than actually having fundamentals back its rise. However, in this piece, we go ahead to explain the firm’s expected future earnings, their drivers and how we expect they will affect IGXT going forward.

Background To IGXT

Before going into the intricacies, however, let us first get a grip on the firm’s history for the sake of first-time readers.The company was founded back in 2003 and headquartered in Montreal, Canada. It focuses on the manufacture and development of pharmaceutical drugs with an incline to oral films. This is achieved through the firm’s proprietary technology: VersaFilm™. IntelGenx Technologies’ state of the art facility ensures the lab-scale piloting, testing, and production of the full-scale drugs is well achieved with the goal of meeting client needs.The oral film is used for the manufacture and development of cannabis products used both for medical and recreational use. This ensures that IGXT serves all segments of the market, broadening their market share especially given the current legalization of cannabis federally in Canada as well as firm-wide by different corporations. Through this, IGXT expects that their growth path is forged facing no way but up.

IGXT: Onto Recent Developments

As previously stated, there has been a lot that IGXT has done in the recent past. Moreover, since our last review of the company – which can be accessed here – the company has made a number of changes in their operations. Key, however, have been the changes in their partnerships.IGXT has forged a number of partnerships, leveraging on their novel technology: VersaFilm™. Using this, they have broadened their market base, providing the service to companies and to individuals alike.One of their recent partnerships has been the cause of the share price surge they currently being experienced. Details on this are explained below.

The Tilray-IntelGenx Partnership

To put this into perspective, let us first have a look at Tilray.Tilray is a renown global leader in the cannabis space. The firm operates within research, research, cultivation, production, and distribution of cannabis and cannabis by-products, allowing it to operate in all market segments. Through this, they have built their expertise, enough to enable them to undertake the current project they have with IGXT.Upon this backdrop, IGXT decided to partner with Tilray to develop their drugs while harnessing the VersaFilm™ technology in the process.In the non-binding letter of intent signed on 20th September, the two firms – subject to entering a definitive agreement – will co-develop and commercialize cannabis-infused oral film products. the agreement will see IGXT fund 20% of the project them fund, manufacture the product and supply it to Tilray while Tilray funds the remaining 80% and hold the exclusive rights to market and distribute the products globally. As a result, IGXT will benefit from receipt of a single-digit royalty on the net proceeds from the sales of the product.To finance this deal, Tilray will make a strategic investment in IGXT by purchasing 1.25 million common shares at a price of $0.80; a $1 million investment in total. The above proceeds will then be used in the product development of VersaFilm™.With the adult cannabis market growing by double digits globally, the above investment in IGXT is bound to pay off. Furthermore, the royalty business model will be important for the firm as it allows it to grow with every growth in sales consecutively for each new year.All in all, the surge experienced in IGXT’s share price speaks not only to the benefit of the royalties’ model but also to the value the shareholders feel is currently being provided by the aforementioned decision. It, therefore, suggests that the firm is about to grow even further, thus being a buy stock.

Conclusion

IGXT has grown their future income significantly. With the current deal set to close, it makes sense to purchase the stock and gain from its long-term highs.We will be updating our subscribers as soon as we know more. For the latest updates on IGXT, sign up below!Disclosure: We have no position in IGXT and have not been compensated for this article.

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